The Bear Market and Depression: How Close to the Bottom?
by ilene - July 13th, 2010 12:09 pm
When discussing Robert Prechter, reactions can be strong, ranging from the extreme of hero worship to the other extreme of complete skepticism. So while Robert Prechter has a cult-like following of Elliott-Wavers, others (such as Damien of Wall St. Cheat Sheet) seriously ask whether he is certifiably insane. My own thoughts are mixed, with conclusions pending. – Ilene
The Bear Market and Depression: How Close to the Bottom?
By Elliott Wave International
Robert Prechter thinks about markets and wave patterns, and goes back to the 1700s, the 1800s, and — most tellingly for our time now — the early 1900s when the Great Depression weighed down the United States in the late 1920s and early 1930s. With this large wash of history in mind, he is able to explain why he thinks we have a long way to go to get to the bottom of this bear market.
Here is an excerpt from the EWI Independent Investor eBook, in which Robert answers the question: How close to the bottom are we?
* * * * *
Originally written by Robert Prechter for The Elliott Wave Theorist, January 2009
Some people contact us and say, “People are more bearish than I have ever seen them. This has to be a bottom.” The first half of this statement may well be true for many market observers. If one has been in the market for less than 14 years, one has never seen people this bearish. But market sentiment over those years was a historical anomaly. The annual dividend payout from stocks reached its lowest level ever: less than half the previous record. The P/E ratio reached its highest level ever: double the previous record. The price-to-book value ratio went into the stratosphere, as did the ratio between corporate bond yields and the same corporations’ stock dividend yields.
During nine and a half of those years, from October 1998 to March 2008, optimism dominated so consistently that bulls outnumbered bears among advisors (per the Investors Intelligence polls) for 481 out of 490 weeks. Investors got so used to this period of euphoria and financial excess that they have taken it as the norm.
With that period as a benchmark, the moderate slippage in optimism since 2007 does appear as a severe change. But observe a subtle irony: When commentators agree that investors are too bearish, they say so to…
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DiggIs Elliott Wave Theory High Priest Robert Prechter Certifiably Insane?
by ilene - July 10th, 2010 2:37 pm
Is Elliott Wave Theory High Priest Robert Prechter Certifiably Insane?
Courtesy of Damien Hoffman at Wall Street Cheat Sheet
Fear is easy to sell. As humans, our core instinct is to avoid pain and survive.
Recently, famed Elliott Wave pundit Robert Prechter has been beating the drum for Dow 1,000. Given all the fear of Big Government and crony corporations, Prechter has some serious passions to exploit. Or, is he simply offering objective financial projections? Or worse, is he certifiably insane?
On Yahoo TechTicker we briefly addressed Prechter’s apocalyptic call. However, I must add I think the US and other sovereign governments will use any means necessary to prop up markets long before asset deflation unleashes chaos not seen in generations.
There is always the statistical probability our economy will degenerate into the Dark Ages. But there exists plenty of economic activity to at least ward off a massive unwinding of all global debt. Moreover, the US has seen these debt levels before and we emerged without sharing crumbs for lunch.
Prechter’s main comparable is from almost 300 years ago:
For a rough parallel, he said, go all the way back to England and the collapse of the South Sea Bubble in 1720, a crash that deterred people “from buying stocks for 100 years,” he said. This time, he said, “If I’m right, it will be such a shock that people will be telling their grandkids many years from now, ‘Don’t touch stocks.’ ”
Call me crazy, but modern civilization hardly resembles anything from 300 years…
Prechter on CNBC: Prechter’s Perspective on Stocks
by ilene - July 7th, 2010 4:46 pm
Prechter on CNBC: Prechter’s Perspective on Stocks
Robert Prechter joins host Maria Bartiromo on CNBC’s Closing Bell to talk about his bearish forecast for stocks and offer investment advice.
FREE Report: 20 Questions with Robert Prechter
Noted financial commentator Jim Puplava asks Robert Prechter tough questions about fiat currency, gold, the Fed, the Great Depression, financial bubbles, government intervention and how to protect your money — and even profit — in today’s environment. Read Prechter’s candid answers for FREE now. Access the 20-page report here.
Put on Your Party Hats – It’s Time to Party for Another Decade!
by Chart School - July 1st, 2010 5:13 pm
Mish is a picture of optimism compared to Robert Prechter (of Elliott Wave Fame). Robert Prechter is wrong, instead of dropping to 1,000, the Dow may only drop to 5,000, and even that may be too pessimistic in Mish’s eyes. - Ilene
Put on Your Party Hats – It’s Time to Party for Another Decade!
Courtesy of Mish
I don’t know about you but I am psyched. The prospects of an ongoing party for another decade are extremely good as the following chart shows.
Dow Jones Industrial Average – 1999 to Present
click on chart for sharper image
Market participants put on their party hats and started cheering in 1999 when the DOW crossed 10,000 for the first time. They have been cheering pretty much nonstop ever since.
Admittedly there was a bit of a party lag between early 2005 and late 2008 but the party hats have been working overtime since mid-2008 as shown below.
Dow Jones Industrial Average – October 2010 to Present
click on chart for sharper image
Lost Decades Comparison
Please bear in mind that some pessimists liken the above behavior to a period of stunning underperformance of the Japanese Nikkei Index over the last two decades.
Japan’s Two Lost Decades
click on chart for sharper image
The Perpetually Optimistic Mish
Being the ever-optimist that I am, I want to quickly point out that while Japan essentially went straight down over two decades, the US by comparison has put in stunning outperformance by going nowhere.
Indeed, the Dow Jones Index is remarkably sitting exactly where it was in April of 1999, over 10 years ago while the Nikkei over the same timeframe fell by about 50%.
Optimists such as myself have only one thing to say: Hallelujah!
Meanwhile doom and gloomers like Robert Prechter think the Dow will fall to 1,000.
To that I say "Poppycock" (pretty harsh language indeed for those who know me well).
By my optimistic comparison, I think the Dow’s downside is 5,000. That is a stunning 400% more optimistic appraisal of the current state of affairs than Prechter.
Furthermore, I freely admit that the DOW, instead of dropping, just may meander around 10,000 for another decade.
Wow. Except for public pension plan assumptions, imagine the parties we can have over that!
Put on Your Party Hats – It’s Time to Party for Another Decade!
by ilene - July 1st, 2010 4:56 pm
Mish is a picture of optimism compared to Robert Prechter (of Elliott Wave Fame). Robert Prechter is wrong, instead of dropping to 1,000, the Dow may only drop to 5,000, and even that may be too pessimistic in Mish’s eyes. – Ilene
Put on Your Party Hats – It’s Time to Party for Another Decade!
Courtesy of Mish
I don’t know about you but I am psyched. The prospects of an ongoing party for another decade are extremely good as the following chart shows.
Dow Jones Industrial Average – 1999 to Present
click on chart for sharper image
Market participants put on their party hats and started cheering in 1999 when the DOW crossed 10,000 for the first time. They have been cheering pretty much nonstop ever since.
Admittedly there was a bit of a party lag between early 2005 and late 2008 but the party hats have been working overtime since mid-2008 as shown below.
Dow Jones Industrial Average – October 2010 to Present
click on chart for sharper image
Lost Decades Comparison
Please bear in mind that some pessimists liken the above behavior to a period of stunning underperformance of the Japanese Nikkei Index over the last two decades.
Japan’s Two Lost Decades
click on chart for sharper image
The Perpetually Optimistic Mish
Being the ever-optimist that I am, I want to quickly point out that while Japan essentially went straight down over two decades, the US by comparison has put in stunning outperformance by going nowhere.
Indeed, the Dow Jones Index is remarkably sitting exactly where it was in April of 1999, over 10 years ago while the Nikkei over the same timeframe fell by about 50%.
Optimists such as myself have only one thing to say: Hallelujah!
Meanwhile doom and gloomers like Robert Prechter think the Dow will fall to 1,000.
To that I say "Poppycock" (pretty harsh language indeed for those who know me well).
By my optimistic comparison, I think the Dow’s downside is 5,000. That is a stunning 400% more optimistic appraisal of the current state of affairs than Prechter.
Furthermore, I freely admit that the DOW, instead of dropping, just may meander around 10,000 for another decade.
Wow. Except for public pension plan assumptions, imagine the parties we can have over that!
Mike "Mish" Shedlock
20 Questions with Robert Prechter: Signs Point to Deflation
by ilene - June 30th, 2010 2:04 pm
20 Questions with Robert Prechter: Signs Point to Deflation
Courtesy of Elliott Wave International
The following article is an excerpt from Elliott Wave International’s free report, 20 Questions With Deflationist Robert Prechter. It has been adapted from Prechter’s June 19 appearance on Jim Puplava’s Financial Sense Newshour. To read the entire conversation, access the 20-page report here.
Jim Puplava: Bob, I want to pick up from last September. Since then we’ve had several quarters of positive economic growth. Asset classes rose substantially, CPI turned positive, gold has hit a new record, oil is close to $80 a barrel. I guess a lot of our listeners would like to know, have these events altered your views on deflation?
Robert Prechter: No, because we forecasted these events, and we forecasted them at the bottom in March and April of 2009. On February 23 in the Elliott Wave Theorist, I said that we were almost at the bottom; that ideally the S&P should get down in the 600s before turning up; and that the Dow was going to rally from that low up to about 10,000. We put that target out a few days after the low. The main thing we said at the time was that it was going to be only a partial retracement, in other words a bear market rally. By the end of it, we said people would be bullish on the economy, there would be positive economic numbers, investors would think we have made the turn, the Fed would take credit for having saved the financial system, and there would be optimism across the board. All of this has happened. And going into April 2010, few people in the fundamentalist or technical camp were looking for a downturn.
The final thing I said was that Obama’s popularity would rise into that peak, and on that one I was wrong. His ratings couldn’t even bounce during that period, which I found very surprising. But both Obama and George Bush’s popularity trends followed the real value of stocks, not the inflated dollar price of the stock market, which I find interesting.
As far as inflation and deflation go, we had deflation during the down cycle in 2008. Commodities fell hard, the stock market fell hard and real estate fell hard. But the recovery that we were looking for in the first quarter of 2009 was expected
…
Big Bear Markets: More Than Falling Stock Prices
by ilene - June 16th, 2010 5:12 pm
Big Bear Markets: More Than Falling Stock Prices
Many infamous authoritarian regimes emerged during or after big bear markets
Courtesy of Elliott Wave International
Fear and uncertainty that drive a severe bear market are the same emotions which can set the stage for authoritarianism, in most any nation.
"Bear markets of sufficient size appear to bring about a desire to slaughter groups of successful people. In 1793-1794, radical Frenchmen guillotined countless members of high society. In the 1930s, Stalin slaughtered Ukrainians. In the 1940s, Nazis slaughtered Jews. In the 1970s, Communists in Cambodia and China slaughtered the affluent. In 1998, after their country’s financial collapse, Indonesians went on a rampage and slaughtered Chinese merchants." - Bob Prechter, Wave Principle of Human Social Behavior, p. 270
Why do authoritarian tendencies emerge only during bear markets in stocks?
"As society becomes more fearful, many individuals yearn for the safety and order promised by strong, controlling leaders." - The Socionomist, May 2010
Bob Prechter’s new science of socionomics explains that stock market fluctuations mirror trends in people’s collective mood. In simple terms, when the market is buoyant, it indicates positive social mood; the opposite when a bear market takes over.
The fascinating part is that because the stock market and social mood trend closely together, a forecaster can apply Elliott wave analysis to both — and predict both.
Generally, widespread brutalities and wars do not follow the first phase of a bear market. Extreme violence, when it does occur, often follows the worst part of the market’s downturn — like the end of the Great Depression, a negative social mood period that ultimately ushered in World War II.
But even during the first phase, a negative social mood grows. So, if a forecaster determines correctly where in the wave structure social mood resides, he can make educated forecasts about what will follow in society — given what has happened before under similar social mood trends.
Authoritarianism is a subject of heated discussions these days, which makes it a timely topic for a socionomic study. The latest, two-part issue of the monthly Socionomist gives you just that: A look at historic trends and specific forecasts for the years ahead.
Learn How to Anticipate and Prepare for Political Conflict and War, Bull Markets and Bear Markets. The 118-page Independent Investor eBook covers a vast array of investment topics and exposes myths that mainstream investors accept as fact. Once you learn…
Deflation: How To Survive It
by ilene - June 11th, 2010 4:10 pm
Deflation: How To Survive It
Important warnings about deflation from Robert Prechter.
Courtesy of Elliott Wave International
Telegraph.go.uk, May 26: "US money supply plunges at 1930s pace… The M3 money supply in the U.S. is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history."
Deflation is suddenly in the news again. It’s a good moment to catch up on a few definitions, as well as strategies on how to beat this rare economic condition.
And who better to ask than EWI’s president Robert Prechter? He predicted the first wave of deflation in the 2007-2009 "credit crunch" and has written on this topic extensively.
We’ve put together a great free resource for our Club EWI members: a 63-page "Deflation Survival Guide eBook," Prechter’s most important deflation essays. Enjoy this excerpt — to read the full eBook, free, look below.
What Makes Deflation Likely Today?
Bob Prechter, Deflation Survival Guide, free Club EWI eBook
Following the Great Depression, the Fed and the U.S. government embarked on a program…both of increasing the creation of new money and credit and of fostering the confidence of lenders and borrowers so as to facilitate the expansion of credit. These policies both accommodated and encouraged the expansionary trend of the ’Teens and 1920s, which ended in bust, and the far larger expansionary trend that began in 1932 and which has accelerated over the past half-century. Other governments and central banks have followed similar policies. The International Monetary Fund, the World Bank and similar institutions, funded mostly by the U.S. taxpayer, have extended immense credit around the globe.
Their policies have supported nearly continuous worldwide inflation, particularly over the past thirty years. As a result, the global financial system is gorged with non-self-liquidating credit. Conventional economists excuse and praise this system under the erroneous belief that expanding money and credit promotes economic growth, which is terribly false. It appears to do so for a while, but in the long run, the swollen mass of debt collapses of its own weight, which is deflation, and destroys the economy. A devastated economy, moreover, encourages radical politics, which is even worse.
The value of credit that has been extended worldwide is unprecedented. Worse, most of this debt is the non-self-liquidating type. Much of it comprises…
Prechter: Bank Reform Will Shrink Credit and Kill the Economy
by ilene - June 10th, 2010 10:47 pm
Yahoo Finance Video 3: Prechter: Bank Reform Will Shrink Credit and Kill the Economy
The Senate version of financial regulation is bad for business on Wall Street and, according to the Wall Street Journal, could cut the profits of major financial institutions by roughly 20%. Find out why Robert Prechter thinks it’s also bad for the economy in the third excerpt from Robert Prechter’s May 20 interview with Yahoo! Finance Tech Ticker host Aaron Task.
Get Robert Prechter’s FREE 60-Page Deflation Survival Guide
With you in mind, financial analyst Robert Prechter scoured thousands of pages of his warnings and teachings about deflation. He then handpicked his most important deflation writings and compiled them into a special, unedited, 60-page Deflation Survival Guide. If you havent yet given Prechter’s deflation argument your attention, download Your 60-page Deflation Survival Guide Now FREE.
Prechter on Yahoo! Finance: “Even $1 Trillion Can’t Save the Euro, But Gold is No Safe Haven”
by ilene - June 6th, 2010 9:30 pm
Here’s Robert Prechter’s (of Elliott Wave International) latest video.
Prechter on Yahoo! Finance: "Even $1 Trillion Can’t Save the Euro, But Gold is No Safe Haven"
The euro’s recent loss has been the dollar’s gain, which means that it’s not the best time to buy the U.S. dollar. Meanwhile, the most popular alternative to currencies, gold, isn’t such a good buy either. Watch the second excerpt from Robert Prechter’s May 20 interview with Yahoo! Finance Tech Ticker host Aaron Task to hear what Prechter thinks is in store for the U.S. currency and gold.
For more information from Robert Prechter, download a FREE 10-page issue of the Elliott Wave Theorist. It challenges current recovery hype with hard facts, independent analysis, and insightful charts. You’ll find out why the worst is NOT over and what you can do to safeguard your financial future. Hurry! This free offer expires June 7.
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And in case you missed Robert Prechter’s previous Yahoo video (I did), here it is:
"On Schedule for a Very, Very Long Bear Market"
Robert Prechter discussed the recent global sell-off that has sent all major U.S. averages 10% below their 2010 highs with Yahoo! Finance Tech Ticker host Aaron Task on May 20, 2010. Prechter says that the current climate shows that "we’re in a wave of recognition" where the fundamentals are catching up to the technicals and that it’s time to prepare for a "long way down."
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